MNCs in the News-2017-05-19

China

54 business groups from the United States (US), Japan, Korea, Mexico, and elsewhere sent a letter to Chinese regulators and the Communist Party’s cybersecurity committee to ask them to postpone China’s cybersecurity law that comes into effect on June 1. They argue the law violates China’s World Trade Organization (WTO) obligations, will not enhance China’s cybersecurity, and will unfairly burden industry. The law limits the use of foreign technology, requires invasive reviews, and mandates costly procedures like the storage of data on Chinese customers within China (“Trade Groups Appeal to Beijing to Postpone Cybersecurity Law,” Bloomberg, May 15, 2017, https://www.bloomberg.com/news/articles/2017-05-15/trade-groups-appeal-t...)

In 2011, China reformed pharmaceutical pricing policies that allowed foreign companies to sell premium drugs that had lost patent protection at significant mark-ups over comparable generics. Since that time, pharmaceutical companies have been locked in price negotiations with provinces and hospitals that have lowered prices and reduced sales. Foreign companies hope that reforms that allow for a state co-payment, the authorization of new drugs for reimbursement, and faster approval processes will enable them not only to recover but to hit new sales highs (Tom Hancock, “Big Pharma Hopes Rule Change will Ease China Sales Pain,” Financial Times, May 17, 2017)

Two American Republican Senators sent a letter to US Treasury Secretary Steven Mnuchin warning Ant Financial’s $1.2bn takeover of MoneyGram represents a national security threat and highlighting the lack of opportunity for American firms to buy Chinese financial companies. Of note, both of the Senators are from Kansas which is the headquarters of Euronet, a company whose efforts to buy MoneyGram failed. Several American lawmakers “across party lines have requested an exhaustive review of the deal by the Committee on Foreign Investments in the US” (James Fontanella-Khan, “US Lawmakers Sharpen Criticism of $1.2bn MoneyGram Deal,” Financial Times, May 15, 2017)

Japan

Japan and India are building their economic partnership due to joint strategic and security concerns over China’s expanding One Belt, One Road (OBOR) initiative. Specifically, they are preparing to expand joint infrastructure projects in South Asia and Africa through Japan’s Partnership for Quality Infrastructure to compete with growing Chinese influence. The India-Japan partnership will develop the Dawei port on the Thai-Myanmar border, the Mekong-India Economic Corridor connecting Kenya, Tanzania, and Mozambique in addition to other infrastructure ventures (Dipanjan Roy Chaudhury, “Pushing back against China’s One Belt One Road, India, Japan build strategic ‘Great Wall,’” Economic Times, May 16, 2017, http://economictimes.indiatimes.com/news/economy/infrastructure/pushing-...)

South Korea

China’s economic retaliation against South Korea due to the latter’s adoption of the Terminal High Altitude Area Defense (THAAD) missile system has been subsiding following the inauguration of South Korea’s new president, Moon Jae-in. South Korean multinational firms such as Lotte Group and Orion have seen improvement in their Chinese business activities. Korean airlines have been allowed to resume non-scheduled flights. Tourism and cosmetic companies are preparing for an upswing in Chinese tourist group visits. And Korean musical performances in China are again being welcomed (Jung Suk-yee, “Economic Retaliation by Chinese Government is Somewhat Waning,” BusinessKorea, May 17, 2017, http://www.businesskorea.co.kr/english/news/national/18092-exit-thadd-de...)

South Korean multinational construction and engineering corporations Daewoo E&C and Hanwha E&C are partnering with the Saudi Arabian government to develop a city near its capital Riyadh. The move followed a memorandum of understanding (MoU) that was signed between the two Korean multinational groups and the Saudi Housing Department last year. The project is estimated to cost USD $20 billion and is expected to promote Korean construction in the Middle East and Africa, two areas currently lacking sufficient housing options (Lee Song-hoon, “Daewoo E&C, Hanwha E&C Announce Master Plan on New Saudi Arabian City in Dubai,” BusinessKorea, May 16, 2017, http://www.businesskorea.co.kr/english/news/industry/18086-20b-worth-new...)

Malaysia

After meeting Malaysia’s Prime Minister Datuk Seri Najib Tun Razak in Beijing, Dalian Wanda Group Chairman Wang Jianlin expressed his interest in investing over USD $10 billion in the Bandar Malaysia development. However, no agreement has yet been reached. Earlier, China pledged to encourage Chinese companies to invest in Malaysia and expressed appreciation for Malaysia’s commitment to the Belt and Road Initiative (BRI). At that time, China’s Prime Minister Li Keqiang and Najib signed three MoUs, while two Chinese companies signed another two with Malaysia (Tho, Xin Yi, “Wanda Interested in Bandar Malaysia,” The Star Online, May 14, 2017, http://www.thestar.com.my/news/nation/2017/05/14/wanda-interested-in-ban...)

Proton, Malaysia’s national carmaker, seeks to sell up to a 51 percent stake to a foreign investor because of financial difficulties resulting from bad acquisitions and product quality issues. Proton was founded by Malaysia’s former Prime Minister Mahathir Mohamad who aimed to industrialize Malaysia and disapproved of foreign control over Proton. The board of DRB-Hicom, Proton’s parent company, plans to meet in the near future to discuss bids from China’s Zhejiang Geely Holding Group Co. and France’s PSA Group (Matthew Campbell, and En Han Choong, “Malaysia Eyes Sale of Proton as Mahathir’s Auto Dream Dies,” Bloomberg, May 17, 2017, https://www.bloomberg.com/politics/articles/2017-05-16/malaysia-eyes-sal...)

Singapore

A recent survey by American Express showed that Singapore businesses place emphasis on local investments and resist foreign undertakings because they are “concerned over political and economic uncertainties overseas.” Specifically, 97 percent of the respondents said that if they would increase their spending they would prioritize “staying competitive locally.” The findings are not encouraging for the Singapore government’s efforts to encourage small and medium-sized enterprises to go global to tackle the problem of the city-state’s limited size and development opportunities (“Singapore firms to focus on local investments and hold off on foreign ventures,” Singapore Business Review, May 19, 2017, http://sbr.com.sg/economy/news/singapore-firms-focus-local-investments-a...)

Vietnam

During an economic-trade cooperation seminar held in China’s Fujian Province, Vietnamese President Trần Đại Quang welcomed Chinese hi-tech investment to his country. As the country pursues a green economy, sustainable development and economic growth, Hanoi “treasures all resources,” with private firms and FDI being important potential growth drivers. Hence, Vietnam is making efforts to improve its investment environment and domestic competitiveness to attract more national and international resources. In the past three months, 35 Fujian based firms invested USD $270 million in Vietnam (“Vietnam Welcomes China Hi-Tech Investment: President,” Vietnam News, May 15, 2017, http://vietnamnews.vn/politics-laws/376396/vn-welcomes-china-hi-tech-inv...)

According to the Vietnam Chamber of Commerce & Industry (VCCI) 2016 Vietnam Business Annual Report, 40 percent of Foreign Invested Enterprises (FIE) sustained losses between 2007 and 2015 yet many still increased their production. The explanation lies in so-called transfer pricing. As local authorities seek to attract more foreign investment, they disregard FIEs’ violations, with a striking example being foreign firm Formosa, which received a tax refund that was even higher than the environmental compensation it had to pay for the environmental damages it caused (Kim, Chi, “Transfer Pricing: the Dark Side of FDI,” Vietnamnet, May 12, 2017, http://english.vietnamnet.vn/fms/business/178067/transfer-pricing--the-d...)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.